Singapore banks face margin squeeze despite strong results: Moody’s

Looking ahead to 2025, Moody’s said banks may expect mid- to high-single-digit loan growth.

Singapore’s three largest banks—DBS, OCBC, and UOB—posted strong financial results in 2024, maintaining stable net interest income despite a slight decline in net interest margins (NIM) from 2.2% in 2023 to 2.1% in 2024, according to Moody’s

In its report, Moody’s said this highlights the banks' resilience in a challenging economic landscape, with growth in wealth management fees and trading income offsetting the impact of narrowing margins.

Despite pressure on lending margins, the banks maintained stable net income as a percentage of assets, with DBS outperforming its peers.

The strength of non-interest income sources, including wealth management, credit card fees, and loan-related charges, helped sustain profitability.

Looking ahead to 2025, Moody’s said banks may expect mid- to high-single-digit loan growth, supported by robust fee income and limited rate cuts. Credit costs remain low, with projections set at 20-30 basis points for the year.

Whilst asset quality remained strong in 2024, analysts caution that property-related risks in Greater China could pose challenges.

Real estate loans accounted for 26-29% of total gross loans, with UOB showing the highest non-performing loan (NPL) ratio in real estate lending.

Nonetheless, NPL ratios for all three banks remained relatively low, with DBS at 1.1%, UOB at 1.5%, and OCBC improving from 1% to 0.9%.

In 2025, payout ratios are expected to climb to 60-70%, as banks balance strong capital reserves with shareholder returns.

Funding and liquidity remained key credit strengths, with CASA (current and savings account) deposits rising to 52% of total deposits. The liquidity coverage ratio (LCR) stood between 140-147%, well above regulatory requirements.

Deposit growth is expected to keep pace with loan growth in 2025 to ensure continued financial stability.

A NOTE FROM SINGAPORE BUSINESS REVIEW

If you've been wondering whether SBR could work for your company — yes, probably.

A lot of the companies we partner with started as readers. They'd been following our coverage for a while, saw their own customers and competitors in it, and eventually asked the obvious question: could we do something with you? The answer is usually yes. The shape of it depends on what you're trying to do.

The options are broader than most people assume — thought leadership articles, sponsored content, industry summits across Southeast Asia, regional awards programmes, podcasts, and media placements in print and digital. Some partners use one channel; most use a mix. We figure out the right combination by starting with your brief, not with our rate card.

So if the question has been on your mind, here's the easy way to ask it.

We'll tell you honestly whether we can help, and how. It's a better use of everyone's time.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia